* Canadian dollar rises 1.5% against the greenback
* Loonie hits strongest level since March 16 at 1.3757
* Price of U.S. oil settles 3.3% higher
* Canadian bond yields rise across a steeper curve
By Fergal Smith
TORONTO, May 26 (Reuters) - The commodity-linked Canadian dollar strengthened to a two-month high against its U.S. counterpart on Tuesday as steps to reopen the world economy boosted investor sentiment and some investors that were short the loonie covered their positions.
World shares forged ahead and commodity markets drove higher as investors disregarded Sino-U.S. tensions to focus on the easing of lockdowns and a potential coronavirus vaccine. have all the components of CAD strength kicking-in, risk appetite, big dollar and oil," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.
The U.S. dollar .DXY tumbled nearly 1% against a basket of major currencies, while the price of oil, one of Canada's major exports, was supported by growing confidence that producers are following through on commitments to cut supplies. U.S. crude CLc1 prices settled 3.3% higher at $34.35 a barrel. Canadian dollar CAD=D4 was trading 1.5% higher at 1.3765 to the greenback, or 72.65 U.S. cents, its biggest gain since March 25. The currency touched its strongest intraday level since March 16 at 1.3757.
Some of the currency's gains could have been due to short-covering, after the most recent data from the Commodity Futures Trading Commission showed that speculators have increased their bearish bets on the loonie to the most since June last year.
"When we broke through 1.3850 and 1.3800 that's a lot of pain," Anderson said. "I'm sure people are getting squeezed out of short CAD positions and will likely continue to exit those positions over the next few days."
Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins are due to appear before the Standing Senate Committee on National Finance at 5 p.m. (2100 GMT).
Canadian government bond yields were higher across a steeper yield curve. The 10-year yield CA10YT=RR rose 7.1 basis points to 0.560%.